Thursday, August 26, 2010

The Ship Is Sinking

"Because it's easy to forget what is going on. One day the Dow goes up; the next day, it goes down. One day, the economy seems to be recovering; the next, it seems to be slipping backwards. It is as though we were on a ship that has hit a submerged reef. This ship is still afloat. The bartender is still serving drinks. People stand around and argue about politics. The music is still playing. It's easy to forget that the ship is sinking."
-Bill Bonner, The Daily Reckoning

NEW YORK (AP) -- Stock futures rose moderately Thursday after a drop in claims for unemployment benefits relieved some worries about slowing economic growth.

Weekly jobless claims fall for the first time in a month, and worries about slowing economic growth are dashed? Of course, they must be joking. Or rather stroking the fractured confidence of American investors. Let's see now...

Tuesday we got the "unexpected" drop in existing home sales. Home resales dropped a record 27.2%--nearly twice as much as analysts had expected--to an annual rate of 3.83 million in July, the National Association of Realtors said Tuesday. Meanwhile, inventories rose to 12.5 months from 8.9 months in June, pressuring already depressed home prices. Inventories are at their highest level in more than a decade.

Wednesday we got the "unexpected" drop in new home sales. Sales of new homes dropped to their lowest level since the government started tracking the numbers more than four decades ago, offering an ominous sign for the direction of the already fragile housing market. New homes sold in July at an annual rate of 276,000, off 12.4 percent from June's pace while plummeting 32.4 percent from a year earlier. That's the lowest level since 1963.

Toss in a weaker than expected durable goods orders number just to make things worse, and I'd have to conclude that worries about slowing growth are more than justified. Excluding a 13.1% gain for transportation equipment, durable orders fell 3.8% in July, the biggest drop since January 2009.

There is no recovery, never has been. The recession [er, depression] has just continued to grind along. Two Trillion Dollars has been spent by the US Government to give the ILLUSION of a recovery. The money would have been better spent if it were stuffed in a rocket, and shot at the Moon. And least when the price of Gold gets there, it would have made it easier to cash in.

That the recovery is a failure is continually reported as "unexpected" is alarming. How can the results be unexpected. The economy collapsed because of excessive debt. Only a fool would believe that it could be repaired by adding even more debt to it. Without a doubt the dumbest expectation was that an $8000 tax credit for home buyers was going to turn the housing market around. It has only made the housing market worse.

Everything the government and the Fed has done to pump up the economy has only made the economy worse. Many warned that this would be the result...the same people that warned the housing market was going to implode. Nobody listened to the warnings in 2007, fewer listened to them in 2009. You can pump blood into a corpse 24/7, but a corpse is still a dead body no matter how fresh the blood.

America as we once knew her is finished. It is time for revolutionary change. It is time to end the Fed and purge the Treasury. It is time to clean The House, and reorganize the Senate. It is time to banish Wall Street from Washington, and re-establish the US Constitution as the law of the land.

18 Signs That America Is Rotting Right In Front Of Our Eyes
Sometimes it isn't necessary to quote facts and figures about government debt, unemployment and the trade deficit in order to convey how badly America is decaying. The truth is that millions of Americans can watch America rotting right in front of their eyes by stepping out on their front porches. Record numbers of homes have been foreclosed on and in some of the most run down cities as many as a third of all houses have been abandoned.

Unemployment remains at depressingly high levels and the number of Americans on food stamps continues to set new records month after month. Due to severe budget cuts, class sizes are exploding and school programs are being eliminated. In some areas of the U.S. schools are even going to four day weeks. With little to no funding available, bridges are crumbling and street lights are being turned off in many communities.

In some areas, asphalt roads are actually being ground up and turned back into gravel roads because they are less expensive to maintain. There aren't even as many police available to patrol America's decaying cities because budget problems have forced local communities across the U.S. to lay off tens of thousands of officers.

Once upon a time, the American people worked feverishly to construct beautiful, shining communities from coast to coast. But now we get to watch those communities literally crumble and decay in slow motion. Nothing lasts forever, but for those of us who truly love America it is an incredibly sad thing to witness what is now happening to the great nation that our forefathers built.

The following are 18 signs that America is rotting right in front of our eyes....

In a stunning reversal of fortune, the CRIMEX Rat Bastids were grabbed by their tiny balls the past three days and squeezed to near unconsciousness. With options expiration on the horizon, and the CRIMEX goons lining their ducks up in a row for a killing, a sudden flash surge in buying appeared Tuesday morning and continued unabated until mid-day today as options expired.

With average Gold strike prices at $1200, and Silver at $18, the CRIMEX Rat Bastids are severely underwater as options on the Precious Metals expired this afternoon far into the money. Could we be a step closer to a CRIMEX default in Silver as traders stand tall to take delivery in September? Time will tell. It will take millions in premiums from the bullion banks to coerce option holders to roll forward into November, and fore go delivery in September. With so little Silver available now, who would chance a delivery 60 days from now?

Jim Willie had this for his subscribers on August 22:


Last night in a conversation with Harvey Organ of The Daily Gold and Silver Report Jim Willie offered this:

Had a conversation with the erudite Jim Willie this morning. His sources tell him that the Chinese and Arabs are going after the gold and silver markets in London … with buying sprees every ten days. If so, the prices of gold and silver ought to go parabolic in the months ahead and probably much sooner. There is no way the LBMA crowd can cover their Ponzi-like fractional gold/silver exposure. If they have sold the same gold and silver to many multiples of parties, as we think they have, the LBMA bankers are going down … should the Arabs, Chinese, or anyone else be going after their physical holdings. They will be doomed. Jeff Christian will have to go into hiding.

David Morgan had this to say about this week's surprising action in silver:

David Morgan of The Morgan Report ( today posted 100 seconds of video commentary about this week's surprising action in silver, which has defied the usual pounding down of options expiration week and seems to him to be massive new buying rather than short-covering.

The CRIMEX Rat Bastids today successfully kept Silver from closing a second day in a row above 19. Silver closed at 18.97, and left the Rat Bastids gasping for air. Gold was stopped in it's tracks as it briefly vaulted key resistance at 1240 this morning, and closed at 1235.80. These are extremely powerful moves this week in the face of options expiration. Clearly the rumours of physical bullion supply shortages in London and New York are now being bought as fact.

As increasingly bearish fundamentals pile up on the US Dollar, Precious Metals investors are stepping forward to take possession of physical bullion before there is none left to scoop up. Tomorrow morning at 8:30AM the government will release the revised second quarter GDP number and it is expected to fall up to a full 1% from the 2.5% estimated late last month. A fall in GDP below 2% could launch a cascade in the bond market, and put to rest once and for all the fallacy that US Debt is a "safe-haven". If just 10% of the bond market moves into the Precious Metals, the bullion banks will be destroyed, and the US Fed left without a leg to stand on.

We can not rule out a retest of the $18.50 breakout in Silver before Silver moves higher from here. However, should Silver continue higher from here and crack $19.60 next week, the sky may well be the limit going into a potential September CRIMEX Silver default. Gold is poised to test the recent nominal highs near $1265. Should this occur, it will only add fuel to the Silver Bullet aimed at the heart of the CRIMEX.

Silver Prices Now Rising Faster Than Gold
By: Peter J. Cooper
August is usually a quiet month in the precious metals market but this month is different. Silver has started behaving 100 per cent like a precious metal and not as an industrial commodity, and while stocks and Dr Copper have been falling, silver has been outperforming gold which is also on the up.

What is going on here? This is actually fully consistent with the bullion market rumors about the bank cartel unwinding its silver futures positions in the quietest month of the year.

You would expect gold to be falling a little with stocks under pressure. It is not. And you would expect silver to be selling off even more strongly because it is an industrial commodity as well as a precious metal. But it is not.

Does that mean that the gold price is being set up for a serious spike, and that silver will not only follow but outperform in these fireworks? Without the ability to look under the hood of the silver market – and the suspicion is that the market supply is nothing like what the market supposes – we are still in the dark.

But spot the price breakout. Silver is above $19 this morning. Gold is closing on $1,250. If this trend continues then $1,650 gold by next February could well be accompanied by $30 silver.

Cancer & Desperation of QE2[MUST READ]
By: Jim Willie CB,
The impact from the cancer and desperation of QE2, the next undermine of the USDollar (and other major currencies), can be seen in the price of Gold. Better yet, watch the price of silver, whose price movement has actually been leading gold upward. This week, for the first time in perhaps a decade, silver defied the industrial metals and economically dependent energy sector. Silver is money. Both copper and crude oil fell in price, but silver rose strongly. By the day's end, gold was pulled up by silver. And this happened on a week that features options expiration, which usually sees a strong naked short pounce by JPMorgan, of course to make America strong and liberty exportable. Witness the beginning of outright visible lost control by the syndicate.

Watch the Gold/Oil ratio, which is poised to rise noticeably. Gold is the commodity king, since money. The galloping recession will take down the crude oil price, as demand falls. The natural gas price fell 3% just today on Wednesday. Hedging against the USDollar risk aside, the energy prices have been weak. By contrast, the gold price has risen from direct demand in response to monetary system risk and lost confidence in that monetary system. The global revolt against the USDollar continues quietly. The government bonds are gradually being considered trash backed by yet more bad paper dispensed by government approved printing houses. My analysis has long pointed to the advantages of silver over gold. Gold fights the political wars, but silver rides in on a shiny white glowing horse to win most gains. The supply factors favor silver. The demand factors favor silver. The shortage is acute for silver.

Again, basic economic thought process not within the mental caverns of US economists. The desperate action to launch QE2 will be quite evident in the coming weeks. It will even become a national priority. The bankers and politicians will rush to destroy whatever credibility remains in the USDollar, or any fiat paper currency. The challenge to banking leaders will be to conceal their desperation and panic. They have had no options or alternatives for almost two years, now painfully evident. The impact of the launch will be extremely damaging to the prestige of the USFed in general and Chairman Bernanke in particular. He has not understood much of any events, surely has proffered a string of errant views and obtuse forecasts. Witness the discredit of the central bank franchise system. Fiat paper money is dissolving before our eyes. Notice the assaults on sovereign debt in Europe, a trend which will hit the US shores, all in time. Economists do not expect it, since the American bankers possess the Printing Pre$$. They will be blindsided by Gold, which pulls the carpet from under the US$-based foundation inside its very structure. The Gold bull market will outlast the USTreasury Bond bubble run. The key word to be heard in the next few months will be CONFIDENCE, as in the absence of it when viewing the US financial helm.

The Powerz in charge will choose inflation over any combination of reform, restructure, and replacement of the helm. A recovery could have possibly been in our grasp, maybe in the future after much pain from adjustment. Unfortunately for the bankers in unchallenged power, the respect, prestige, and faith in the US Federal Reserve will fade like a sea mist after the QE launch. Its christening will be done in deep shame with a bottle of acid. The level of respect is approaching rock bottom, the lowest in decades. Even Alan Greenspan expects slippage and sputters as the housing market resumes its powerful decline. The next recession for the USEconomy could very easily result in a USTreasury default. Scenarios for precisely such a default are mapped out in the August Hat Trick Letter.

Gold & Silver are entering the most favorable season of the year, autumn. Big gains should be expected. Signals are omnipresent for substantial price gains. Shortages exist and are profound. Demand is on the strong rise on a global basis. Lost confidence and faith in the fiat paper system is slowly vanishing. It would be nice to see the investment community add to positions and put on new positions before the breakout, not afterwards, and be more successful. The return of the USEconomic recession and the simultaneous QE2 Launch will mark a major turning point for gold & silver. Fear is on the rise. The precious metals offer an alternative to conventional nutball strategies, a successful one. Check out the track record for gold, the best asset in the 1990 decade. That fact is not mentioned or cited much by the financial press networks. Their sponsors object.

Few May Imagine What Is Coming
Rick’s Picks forum contributor Steven George Fair
To a more direct point. Even the supposed perma-bears of today run helterskelter, seeking profit and gain first in that, and then in this, with no long-living devotion to any belief. Most current Bears do not care about fundamentals and history. None seem to care whether or not they are playing in a AntLion hole from which they will never escape. The greed of gaining the last drop of blood from the dying carcass of both bears and bulls is foremost on the heart of the young and younger. No person not directly from a Great Depression family is prepared for what will come. That means that unless your parents where born no later than 1920, you cannot have any basis to form an understanding for the potential pain of a real collapse.

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